A mostly steady tone persisted Tuesday morning, following Monday's flat to slightly stronger bias as traders prepared for two large deals from Texas and California in the competitive market.
"The market is looking OK" ahead of California's nearly $800 million general obligation deal, a Los Angeles trader said. "Treasuries are slightly up and yesterday was an improvement."
Still, last week municipal bond mutual funds posted the largest outflows of August and that continued to put selling pressure in the secondary market. Bid lists surfaced again Tuesday morning. "That's not pushing the market lower," the trader said.
The two large deals in the competitive market should take most of the focus. Texas is expected to issue $7.2 billion of tax and revenue anticipation notes, rated MIG-1 by Moody's Investors Service.
California is scheduled to auction $764.1 million of general obligation bonds in two pricings, $249.2 million and $514.9 million, rated A1 by Moody's and A by Standard & Poor's and Fitch Ratings.
Monday, yields on the triple-A Municipal Market Data scale ended as much as one basis point firmer. The 30-year yield fell one basis point to 4.45%. The two-year finished flat at 0.43% for the 29th straight session and the 10-year was steady at 2.96% for the second session.
Yields on the Municipal Market Advisors scale ended flat across the curve. The 10-year was steady at 3.10% for the second session and the 30-year was flat at 4.55% for the third session. The two-year was flat at 0.55% for the eighth session.
Treasuries were firmer for a third consecutive session. The benchmark 10-year yield slid three basis points to 2.76% and the 30-year yield fell one basis point to 3.76%. The two-year was steady at 0.38%.
